A method for manufacturing an extraordinary magnetoresistive sensor (EMR sensor) having reduced size and increased resolution is described. The sensor includes a plurality of electrically conductive leads contacting a magnetically active layer and also includes an electrically conductive shunt structure. The electrically conductive leads of the sensor and the shunt structure can be formed in a common photolithographic masking and etching process so that they are self aligned with one another. This avoids the need to align multiple photolithographic processing steps, thereby allowing greatly increased resolution and reduced lead spacing. The EMR sensor can be formed with a magnetically active layer that can be close to or at the air bearing surface (ABS) for improved magnetic spacing with an adjacent magnetic medium of a data recording system.